PRODUCT PURPOSE/DESCRIPTION
• DLC/ LC is an instrument issued by a bank to a seller/supplier which substitutes the credit worthiness of the buyer with that of the bank.
• It’s a written conditional undertaking by a bank (issuing bank) given to the exporter/seller (beneficiary) at the request, and in accordance with the importer/ buyer’s (applicant) instructions to effect payment — that is by making a payment, or by accepting or negotiating bills of exchange (drafts) — up to a stated amount, against stipulated documents and within a prescribed time limit, against presentation of specified documents which must comply with the terms of the letter of credit.
FEATURES AND FUNCTIONALITY
- Target Customers
• Importers, Exporters - Security
• Tangible security –property/land or 100% cash margin in currency of transaction or 110% if the cash held is in weaker currency. - Types of LCs
• Sight LC’s: Requires the buyer to make payment once the documents have been presented and verified by issuing bank
• Term/Usance LCs: These are LCs that have a future determinable maturity date e.g., 90 days from Bill of lading date: - Charges:
• As per tariff - Interest rate – The Bank Base Rate advised from time to time plus a margin of up to 10%.
Requirements:
1. Complete application form
2. Pro-forma invoice
3. Import Declaration form (IDF)
4. Insurance cover note for 110% of invoice value in favour of the Bank
5. Board resolutions
BENEFITS
- Credit enhancement
- Provides a form of security to the trading partners
- Mitigate Risk Form of Financing
- Efficient document processing and timely payment
- Enhanced relationships with the suppliers